S.Amdt. 3854

SA 3854. Mr. REED (for himself and Mr. Akaka) submitted an amendment
intended to be proposed to amendment SA 3739 proposed by Mr. Reid (for
Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217, to
promote the financial stability of the United States by improving
accountability and transparency in the financial system, to end ``too
big to fail'', to protect the American taxpayer by ending bailouts, to
protect consumers from abusive financial services practices, and for
other purposes; which was ordered to lie on the table; as follows:

On page 1187, line 9, strike ``effective.'' and insert the
following: ``effective.

Subtitle K--Additional Amendments to the Securities Laws

SEC. 992. STRENGTHENING ENFORCEMENT BY THE COMMISSION.

(a) Nationwide Service of Subpoenas.--
(1) Securities act of 1933.--Section 22(a) of the
Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by
inserting after the second sentence the following: ``In any
action or proceeding instituted by the Commission under this
title in a United States district court for any judicial
district, a subpoena issued to compel the attendance of a
witness or the production of documents or tangible things (or
both) at a hearing or trial may be served at any place within
the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules
of Civil Procedure shall not apply to a subpoena issued under
the preceding sentence.''.
(2) Securities exchange act of 1934.--Section 27 of the
Securities Exchange Act of 1934 (15 U.S.C. 78aa) is amended
by inserting after the third sentence the following: ``In any
action or proceeding instituted by the Commission under this
title in a United States district court for any judicial
district, a subpoena issued to compel the attendance of a
witness or the production of documents or tangible things (or
both) at a hearing or trial may be served at any place within
the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules
of Civil Procedure shall not apply to a subpoena issued under
the preceding sentence.''.
(3) Investment company act of 1940.--Section 44 of the
Investment Company Act of 1940 (15 U.S.C. 80a-43) is amended
by inserting after the fourth sentence the following: ``In
any action or proceeding instituted by the Commission under
this title in a United States district court for any judicial
district, a subpoena issued to compel the attendance of a
witness or the production of documents or tangible things (or
both) at a hearing or trial may be served at any place within
the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules
of Civil Procedure shall not apply to a subpoena issued under
the preceding sentence.''.
(4) Investment advisers act of 1940.--Section 214 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-14) is amended
by inserting after the third sentence the following: ``In any
action or proceeding instituted by the Commission under this
title in a United States district court for any judicial
district, a subpoena issued to compel the attendance of a
witness or the production of documents or tangible things (or
both) at a hearing or trial may be served at any place within
the United States. Rule 45(c)(3)(A)(ii) of the Federal Rules
of Civil Procedure shall not apply to a subpoena issued under
the preceding sentence.''.
(b) Authority to Impose Civil Penalties in Cease and Desist
Proceedings.--
(1) Under the securities act of 1933.--Section 8A of the
Securities Act of 1933 (15 U.S.C. 77h-1) is amended by adding
at the end the following new subsection:
``(g) Authority to Impose Money Penalties.--
``(1) Grounds.--In any cease-and-desist proceeding under
subsection (a), the Commission may impose a civil penalty on
a person if the Commission finds, on the record, after notice
and opportunity for hearing, that--
``(A) such person--
``(i) is violating or has violated any provision of this
title, or any rule or regulation issued under this title; or
``(ii) is or was a cause of the violation of any provision
of this title, or any rule or regulation thereunder; and
``(B) such penalty is in the public interest.
``(2) Maximum amount of penalty.--
``(A) First tier.--The maximum amount of a penalty for each
act or omission described in paragraph (1) shall be $7,500
for a natural person or $75,000 for any other person.
``(B) Second tier.--Notwithstanding subparagraph (A), the
maximum amount of penalty for each such act or omission shall
be $75,000 for a natural person or $375,000 for any other
person, if the act or omission described in paragraph (1)
involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement.
``(C) Third tier.--Notwithstanding subparagraphs (A) and
(B), the maximum amount of penalty for each such act or
omission shall be $150,000 for a natural person or $725,000
for any other person, if--
``(i) the act or omission described in paragraph (1)
involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement; and
``(ii) such act or omission directly or indirectly resulted
in--

``(I) substantial losses or created a significant risk of
substantial losses to other persons; or
``(II) substantial pecuniary gain to the person who
committed the act or omission.

``(3) Evidence concerning ability to pay.--In any
proceeding in which the Commission may impose a penalty under
this section, a respondent may present evidence of the
ability of the respondent to pay such penalty. The Commission
may, in its discretion, consider such evidence in determining
whether such penalty is in the public interest. Such evidence
may relate to the extent of the ability of the respondent to
continue in business and the collectability of a penalty,
taking into account any other claims of the United States or
third parties upon the assets of the respondent and the
amount of the assets of the respondent.''.
(2) Under the securities exchange act of 1934.--Section
21B(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-
2(a)) is amended--
(A) by striking the matter following paragraph (4);
(B) in the matter preceding paragraph (1), by inserting
after ``opportunity for hearing,'' the following: ``that such
penalty is in the public interest and'';
(C) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and adjusting
the margins accordingly;
(D) by striking ``In any proceeding'' and inserting the
following:
``(1) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(2) Cease-and-desist proceedings.--In any proceeding
instituted under section 21C against any person, the
Commission may impose a civil penalty, if the Commission
finds, on the record after notice and opportunity for
hearing, that such person--
``(A) is violating or has violated any provision of this
title, or any rule or regulation issued under this title; or
``(B) is or was a cause of the violation of any provision
of this title, or any rule or regulation issued under this
title.''.
(3) Under the investment company act of 1940.--Section
9(d)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-
9(d)(1)) is amended--
(A) by striking the matter following subparagraph (C);
(B) in the matter preceding subparagraph (A), by inserting
after ``opportunity for hearing,'' the following: ``that such
penalty is in the public interest, and'';
(C) by redesignating subparagraphs (A) through (C) as
clauses (i) through (iii), respectively, and adjusting the
margins accordingly;
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Cease-and-desist proceedings.--In any proceeding
instituted pursuant to subsection (f) against any person, the
Commission may impose a civil penalty if the Commission
finds, on the record, after notice and opportunity for
hearing, that such person--
``(i) is violating or has violated any provision of this
title, or any rule or regulation issued under this title; or

[[Page S3274]]

``(ii) is or was a cause of the violation of any provision
of this title, or any rule or regulation issued under this
title.''.
(4) Under the investment advisers act of 1940.--Section
203(i)(1) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-3(i)(1)) is amended--
(A) by striking the matter following subparagraph (D);
(B) in the matter preceding subparagraph (A), by inserting
after ``opportunity for hearing,'' the following: ``that such
penalty is in the public interest and'';
(C) by redesignating subparagraphs (A) through (D) as
clauses (i) through (iv), respectively, and adjusting the
margins accordingly;
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following new subparagraph:
``(B) Cease-and-desist proceedings.--In any proceeding
instituted pursuant to subsection (k) against any person, the
Commission may impose a civil penalty if the Commission
finds, on the record, after notice and opportunity for
hearing, that such person--
``(i) is violating or has violated any provision of this
title, or any rule or regulation issued under this title; or
``(ii) is or was a cause of the violation of any provision
of this title, or any rule or regulation issued under this
title.''.
(c) Formerly Associated Persons.--
(1) Member or employee of the municipal securities
rulemaking board.--Section 15B(c)(8) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o-4(c)(8)) is amended by
striking ``any member or employee'' and inserting ``any
person who is, or at the time of the alleged violation or
abuse was, a member or employee''.
(2) Person associated with a government securities broker
or dealer.--Section 15C(c) of the Securities Exchange Act of
1934 (15 U.S.C. 78o-5(c)) is amended--
(A) in paragraph (1)(C), by striking ``any person
associated, or seeking to become associated,'' and inserting
``any person who is, or at the time of the alleged misconduct
was, associated or seeking to become associated''; and
(B) in paragraph (2)--
(i) in subparagraph (A), by inserting ``, seeking to become
associated, or, at the time of the alleged misconduct,
associated or seeking to become associated'' after ``any
person associated''; and
(ii) in subparagraph (B), by inserting ``, seeking to
become associated, or, at the time of the alleged misconduct,
associated or seeking to become associated'' after ``any
person associated''.
(3) Person associated with a member of a national
securities exchange or registered securities association.--
Section 21(a)(1) of the Securities Exchange Act of 1934 (15
U.S.C. 78u(a)(1)) is amended, in the first sentence, by
inserting ``, or, as to any act or practice, or omission to
act, while associated with a member, formerly associated''
after ``member or a person associated''.
(4) Participant of a registered clearing agency.--Section
21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C.
78u(a)(1)) is amended, in the first sentence, by inserting
``or, as to any act or practice, or omission to act, while a
participant, was a participant,'' after ``in which such
person is a participant,''.
(5) Officer or director of a self-regulatory
organization.--Section 19(h)(4) of the Securities Exchange
Act of 1934 (15 U.S.C. 78s(h)(4)) is amended--
(A) by striking ``any officer or director'' and inserting
``any person who is, or at the time of the alleged misconduct
was, an officer or director''; and
(B) by striking ``such officer or director'' and inserting
``such person''.
(6) Officer or director of an investment company.--Section
36(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
35(a)) is amended--
(A) by striking ``a person serving or acting'' and
inserting ``a person who is, or at the time of the alleged
misconduct was, serving or acting''; and
(B) by striking ``such person so serves or acts'' and
inserting ``such person so serves or acts, or at the time of
the alleged misconduct, so served or acted''.
(7) Person associated with a public accounting firm.--
(A) Sarbanes-oxley act of 2002 amendment.--Section 2(a)(9)
of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(9)) is
amended by adding at the end the following:
``(C) Investigative and enforcement authority.--For
purposes of sections 3(c), 101(c), 105, and 107(c) and the
rules of the Board and Commission issued thereunder, except
to the extent specifically excepted by such rules, the terms
defined in subparagraph (A) shall include any person
associated, seeking to become associated, or formerly
associated with a public accounting firm, except that--
``(i) the authority to conduct an investigation of such
person under section 105(b) shall apply only with respect to
any act or practice, or omission to act, by the person while
such person was associated or seeking to become associated
with a registered public accounting firm; and
``(ii) the authority to commence a disciplinary proceeding
under section 105(c)(1), or impose sanctions under section
105(c)(4), against such person shall apply only with respect
to--

``(I) conduct occurring while such person was associated or
seeking to become associated with a registered public
accounting firm; or
``(II) non-cooperation, as described in section 105(b)(3),
with respect to a demand in a Board investigation for
testimony, documents, or other information relating to a
period when such person was associated or seeking to become
associated with a registered public accounting firm.''.

(B) Securities exchange act of 1934 amendment.--Section
21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C.
78u(a)(1)) is amended by striking ``or a person associated
with such a firm'' and inserting ``, a person associated with
such a firm, or, as to any act, practice, or omission to act,
while associated with such firm, a person formerly associated
with such a firm''.
(8) Supervisory personnel of an audit firm.--Section
105(c)(6) of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7215(c)(6)) is amended--
(A) in subparagraph (A), by striking ``the supervisory
personnel'' and inserting ``any person who is, or at the time
of the alleged failure reasonably to supervise was, a
supervisory person''; and
(B) in subparagraph (B)--
(i) by striking ``No associated person'' and inserting ``No
current or former supervisory person''; and
(ii) by striking ``any other person'' and inserting ``any
associated person''.
(9) Member of the public company accounting oversight
board.--Section 107(d)(3) of the Sarbanes-Oxley Act of 2002
(15 U.S.C. 7217(d)(3)) is amended by striking ``any member''
and inserting ``any person who is, or at the time of the
alleged misconduct was, a member''.
(d) Extraterritorial Jurisdiction of the Antifraud
Provisions of the Federal Securities Laws.--
(1) Under the securities act of 1933.--Section 22 of the
Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by
adding at the end the following new subsection:
``(c) Extraterritorial Jurisdiction.--The district courts
of the United States and the United States courts of any
Territory shall have jurisdiction of an action or proceeding
brought or instituted by the Commission or the United States
alleging a violation of section 17(a) involving--
``(1) conduct within the United States that constitutes
significant steps in furtherance of the violation, even if
the securities transaction occurs outside the United States
and involves only foreign investors; or
``(2) conduct occurring outside the United States that has
a foreseeable substantial effect within the United States.''.
(2) Under the securities exchange act of 1934.--Section 27
of the Securities Exchange Act of 1934 (15 U.S.C. 78aa) is
amended--
(A) by striking ``The district'' and inserting the
following:
``(a) In General.--The district''; and
(B) by adding at the end the following new subsection:
``(b) Extraterritorial Jurisdiction.--The district courts
of the United States and the United States courts of any
Territory shall have jurisdiction of an action or proceeding
brought or instituted by the Commission or the United States
alleging a violation of the antifraud provisions of this
title involving--
``(1) conduct within the United States that constitutes
significant steps in furtherance of the violation, even if
the securities transaction occurs outside the United States
and involves only foreign investors; or
``(2) conduct occurring outside the United States that has
a foreseeable substantial effect within the United States.''.
(3) Under the investment advisers act of 1940.--Section 214
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-14) is
amended--
(A) by striking ``The district'' and inserting the
following:
``(a) In General.--The district''; and
(B) by adding at the end the following new subsection:
``(b) Extraterritorial Jurisdiction.--The district courts
of the United States and the United States courts of any
Territory shall have jurisdiction of an action or proceeding
brought or instituted by the Commission or the United States
alleging a violation of section 206 involving--
``(1) conduct within the United States that constitutes
significant steps in furtherance of the violation, even if
the violation is committed by a foreign adviser and involves
only foreign investors; or
``(2) conduct occurring outside the United States that has
a foreseeable substantial effect within the United States.''.
(e) Control Person Liability Under the Securities Exchange
Act of 1934.--Section 20(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78t(a)) is amended by inserting after
``controlled person is liable'' the following: ``(including
to the Commission in any action brought under paragraph (1)
or (3) of section 21(d))''.
(f) Aiding and Abetting Under the Securities Laws.--
(1) Under the securities act of 1933.--Section 15 of the
Securities Act of 1933 (15 U.S.C. 77o) is amended--
(A) by striking ``Every person who'' and inserting ``(a)
Controlling Persons.--Every person who''; and
(B) by adding at the end the following:
``(b) Prosecution of Persons Who Aid and Abet Violations.--
For purposes of any action brought by the Commission under
subparagraph (b) or (d) of section 20, any person

[[Page S3275]]

that knowingly or recklessly provides substantial assistance
to another person in violation of a provision of this Act, or
of any rule or regulation issued under this Act, shall be
deemed to be in violation of such provision to the same
extent as the person to whom such assistance is provided.''.
(2) Under the investment company act of 1940.--Section 48
of the Investment Company Act of 1940 (15 U.S.C. 80a-48) is
amended by redesignating subsection (b) as subsection (c) and
inserting after subsection (a) the following:
``(b) For purposes of any action brought by the Commission
under subsection (d) or (e) of section 42, any person that
knowingly or recklessly provides substantial assistance to
another person in violation of a provision of this Act, or of
any rule or regulation issued under this Act, shall be deemed
to be in violation of such provision to the same extent as
the person to whom such assistance is provided.''.
(3) Under the investment advisers act.--Section 209 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-9) is amended
by inserting at the end the following new subsection:
``(f) Aiding and Abetting.--For purposes of any action
brought by the Commission under subsection (e), any person
that knowingly or recklessly has aided, abetted, counseled,
commanded, induced, or procured a violation of any provision
of this Act, or of any rule, regulation, or order hereunder,
shall be deemed to be in violation of such provision, rule,
regulation, or order to the same extent as the person that
committed such violation.''.
(4) Under the securities exchange act of 1934.--Section
20(e) of the Securities Exchange Act of 1934 (15 U.S.C.
78t(e)) is amended by inserting ``or recklessly'' after
``knowingly''.

SEC. 993. ADDRESSING ISSUES REVEALED BY THE MADOFF FRAUD.

(a) Revision to Recordkeeping Rule.--
(1) Investment company act of 1940 amendments.--Section 31
of the Investment Company Act of 1940 (15 U.S.C. 80a-30) is
amended--
(A) in subsection (a)(1), by adding at the end the
following: ``Each person having custody or use of the
securities, deposits, or credits of a registered investment
company shall maintain and preserve all records that relate
to the custody or use by such person of the securities,
deposits, or credits of the registered investment company for
such period or periods as the Commission, by rule or
regulation, may prescribe, as necessary or appropriate in the
public interest or for the protection of investors.''; and
(B) in subsection (b), by adding at the end the following:
``(4) Records of persons with custody or use.--
``(A) In general.--Records of persons having custody or use
of the securities, deposits, or credits of a registered
investment company that relate to such custody or use, are
subject at any time, or from time to time, to such reasonable
periodic, special, or other examinations and other
information and document requests by representatives of the
Commission, as the Commission deems necessary or appropriate
in the public interest or for the protection of investors.
``(B) Certain persons subject to other regulation.--Any
person that is subject to regulation and examination by a
Federal financial institution regulatory agency (as such term
is defined under section 212(c)(2) of title 18, United States
Code) may satisfy any examination request, information
request, or document request described under subparagraph
(A), by providing to the Commission a detailed listing, in
writing, of the securities, deposits, or credits of the
registered investment company within the custody or use of
such person.''.
(2) Investment advisers act of 1940 amendment.--Section 204
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4) is
amended by adding at the end the following new subsection:
``(d) Records of Persons With Custody or Use.--
``(1) In general.--Records of persons having custody or use
of the securities, deposits, or credits of a client, that
relate to such custody or use, are subject at any time, or
from time to time, to such reasonable periodic, special, or
other examinations and other information and document
requests by representatives of the Commission, as the
Commission deems necessary or appropriate in the public
interest or for the protection of investors.
``(2) Certain persons subject to other regulation.--Any
person that is subject to regulation and examination by a
Federal financial institution regulatory agency (as such term
is defined under section 212(c)(2) of title 18, United States
Code) may satisfy any examination request, information
request, or document request described under paragraph (1),
by providing the Commission with a detailed listing, in
writing, of the securities, deposits, or credits of the
client within the custody or use of such person.''.
(b) Streamlined Hiring Authority for Market Specialists.--
(1) Appointment authority.--Section 3114 of title 5, United
States Code, is amended by striking the section heading and
all that follows through the end of subsection (a) and
inserting the following:

``Sec. 3114. Appointment of candidates to certain positions
in the competitive service by the Securities and Exchange
Commission

``(a) Applicability.--This section applies with respect to
any position of accountant, economist, and securities
compliance examiner at the Commission that is in the
competitive service, and any position at the Commission in
the competitive service that requires specialized knowledge
of financial and capital market formation or regulation,
financial market structures or surveillance, or information
technology.''.
(2) Clerical amendment.--The table of sections for chapter
31 of title 5, United States Code, is amended by striking the
item relating to section 3114 and inserting the following:

``3114. Appointment of candidates to positions in the competitive
service by the Securities and Exchange Commission.''.
(3) Pay authority.--The Commission may set the rate of pay
for experts and consultants appointed under the authority of
section 3109 of title 5, United States Code, in the same
manner in which it sets the rate of pay for employees of the
Commission.
(c) SIPC Reforms.--
(1) Removing the distinction between claims for cash and
claims for securities.--The Securities Investor Protection
Act of 1970 (15 U.S.C. 78aaa et seq.) is amended--
(A) in section 8(e)(4)(B) (15 U.S.C. 78fff-2(e)(4)(B)), by
striking ``for cash or securities'';
(B) in section 9(a) (15 U.S.C. 78fff-3(a))--
(i) by striking paragraph (1); and
(ii) by redesignating paragraphs (2) through (5) as
paragraphs (1) through (4), respectively; and
(C) in section 16(2)(B) (15 U.S.C. 78lll(2)(B)), by
striking ``for cash or securities''.
(2) Liquidation of a carrying broker-dealer.--Section
5(a)(3) of the Securities Investor Protection Act of 1970 (15
U.S.C. 78eee(a)(3)) is amended--
(A) by striking the undesignated matter following
subparagraph (B);
(B) in subparagraph (A), by striking ``any member of SIPC''
and inserting ``the member'';
(C) in subparagraph (B), by striking the comma at the end
and inserting a period;
(D) in the matter preceding subparagraph (A), by striking
``If SIPC'' and inserting the following:
``(A) In general.--SIPC may, upon notice to a member of
SIPC, file an application for a protective decree with any
court of competent jurisdiction specified in section 21(e) or
27 of the Securities Exchange Act of 1934, except that no
such application shall be filed with respect to a member, the
only customers of which are persons whose claims could not be
satisfied by SIPC advances pursuant to section 9, if SIPC'';
and
(E) by adding at the end the following:
``(B) Consent required.--No member of SIPC that has a
customer may enter into an insolvency, receivership, or
bankruptcy proceeding, under Federal or State law, without
the specific consent of SIPC.''.

SEC. 994. ENHANCED ABILITY OF COMMISSION TO OBTAIN NEEDED
INFORMATION.

(a)  Investment Company Examination.--Section 31(b)(1) of
the Investment Company Act of 1940 (15 U.S.C. 80a-30(b)(1))
is amended to read as follows:
``(1) In general.--The following records shall be subject,
at any time, or from time to time, to such reasonable
periodic, special, or other examinations by representatives
of the Commission as the Commission deems necessary or
appropriate in the public interest or for the protection of
investors:
``(A) All records of a registered investment company.
``(B) All records of a underwriter, broker, dealer, or
investment adviser that is a majority-owned subsidiary of a
registered investment company.
``(C) All records required to be maintained and preserved
by a investment adviser that is not a majority-owned
subsidiary of a registered investment company.
``(D) All records required to be maintained and preserved
by a depositor of a registered investment company.
``(E) All records required to be maintained and preserved
by a principal underwriter for a registered investment
company (other than a closed-end company).''.
(b) Expanded Access to Grand Jury Information.--Chapter 215
of title 18, United States Code, is amended by adding at the
end the following:

``Sec. 3323. Access to grand jury information

``(a) Disclosure.--
``(1) In general.--Upon motion of an attorney for the
government, a court may direct disclosure of matters
occurring before a grand jury during an investigation of
conduct that may constitute a violation of any provision of
the securities laws to the Securities and Exchange Commission
for use in relation to any matter within the jurisdiction of
the Commission.
``(2) Substantial need required.--A court may issue an
order under paragraph (1) only upon a finding of a
substantial need in the public interest.
``(b) Use of Matter.--A person to whom a matter has been
disclosed under this section shall not use such matter, other
than for the purpose for which such disclosure was
authorized.
``(c) Definitions.--As used in this section--
``(1) the terms `attorney for the government' and `grand
jury information' have the meanings given to those terms in
section 3322 of title 18, United States Code; and
``(2) the term `securities laws' has the same meaning as in
section 3(a)(47) of the Securities Exchange Act of 1934.''.

[[Page S3276]]

(c) Enhanced Authority of the Securities and Exchange
Commission to Conduct Surveillance and Risk Assessment.--
(1) Securities exchange act of 1934.--Section 17(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78q(b)) is amended
by adding at the end the following:
``(5) Surveillance and risk assessment.--All persons
described in subsection (a) are subject, at any time, or from
time to time, to such reasonable periodic, special, or other
information and document requests by representatives of the
Commission as the Commission, by rule or order, deems
necessary or appropriate to conduct surveillance or risk
assessments of the securities markets, persons registered
with the Commission under this title, or otherwise in
furtherance of the purposes of this title.''.
(2) Investment company act of 1940.--Section 31(b) of the
Investment Company Act of 1940 (15 U.S.C. 80a-30(b)) is
amended by adding at the end the following:
``(5) Surveillance and risk assessment.--All persons
described in subsection (a) are subject at any time, or from
time to time, to such reasonable periodic, special, or other
information and document requests by representatives of the
Commission as the Commission, by rule or order, deems
necessary or appropriate to conduct surveillance or risk
assessments of the securities markets, persons registered
with the Commission under this title, or otherwise in
furtherance of the purposes of this title.''.
(3) Document requests.--Section 204 of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-4) is amended by adding
at the end the following:
``(e) Surveillance and Risk Assessment.--All persons
described in subsection (a) are subject at any time, or from
time to time, to such reasonable periodic, special, or other
information and document requests by representatives of the
Commission as the Commission, by rule or order, deems
necessary or appropriate to conduct surveillance or risk
assessments of the securities markets, persons registered
with the Commission under this title, or otherwise in
furtherance of the purposes of this title.''.
(d) Protecting Confidentiality of Materials Submitted to
the Commission.--
(1) Securities exchange act of 1934.--Section 24 of the
Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended--
(A) in subsection (d), by striking ``subsection (e)'' and
inserting ``subsection (f)'';
(B) by redesignating subsection (e) as subsection (f); and
(C) by inserting after subsection (d) the following:
``(e) Records Obtained From Registered Persons.--
``(1) In general.--Except as provided in subsection (f),
the Commission shall not be compelled to disclose records or
information obtained pursuant to section 17(b), or records or
information based upon or derived from such records or
information, if such records or information have been
obtained by the Commission for use in furtherance of the
purposes of this title, including surveillance, risk
assessments, or other regulatory and oversight activities.
``(2) Treatment of information.--For purposes of section
552 of title 5, United States Code, this subsection shall be
considered a statute described in subsection (b)(3)(B) of
such section 552. Collection of information pursuant to
section 17 shall be an administrative action involving an
agency against specific individuals or agencies pursuant to
section 3518(c)(1) of title 44, United States Code.''.
(2) Investment company act of 1940.--Section 31 of the
Investment Company Act of 1940 (15 U.S.C. 80a-30) is
amended--
(A) by striking subsection (c) and inserting the following:
``(c) Limitations on Disclosure by Commission.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any records or information
provided to the Commission under this section, or records or
information based upon or derived from such records or
information, if such records or information have been
obtained by the Commission for use in furtherance of the
purposes of this title, including surveillance, risk
assessments, or other regulatory and oversight activities.
Nothing in this subsection authorizes the Commission to
withhold information from the Congress or prevent the
Commission from complying with a request for information from
any other Federal department or agency requesting the
information for purposes within the scope of jurisdiction of
that department or agency, or complying with an order of a
court of the United States in an action brought by the United
States or the Commission. For purposes of section 552 of
title 5, United States Code, this section shall be considered
a statute described in subsection (b)(3)(B) of such section
552. Collection of information pursuant to section 31 shall
be an administrative action involving an agency against
specific individuals or agencies pursuant to section
3518(c)(1) of title 44, United States Code.'';
(B) by striking subsection (d); and
(C) by redesignating subsections (e) and (f) as subsections
(d) and (e), respectively.
(3) Investment advisers act of 1940.--Section 210 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-10) is amended
by adding at the end the following:
``(d) Limitations on Disclosure by the Commission.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any records or information
provided to the Commission under this section, or records or
information based upon or derived from such records or
information, if such records or information have been
obtained by the Commission for use in furtherance of the
purposes of this title, including surveillance, risk
assessments, or other regulatory and oversight activities.
Nothing in this subsection authorizes the Commission to
withhold information from the Congress or prevent the
Commission from complying with a request for information from
any other Federal department or agency requesting the
information for purposes within the scope of jurisdiction of
that department or agency, or complying with an order of a
court of the United States in an action brought by the United
States or the Commission. For purposes of section 552 of
title 5, United States Code, this section shall be considered
a statute described in subsection (b)(3)(B) of such section
552. Collection of information pursuant to section 31 shall
be an administrative action involving an agency against
specific individuals or agencies pursuant to section
3518(c)(1) of title 44, United States Code.''.
(e) Expansion of Audit Information to Be Produced and
Exchanged.--Section 106 of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7216) is amended--
(1) by striking subsection (b) and inserting the following:
``(b) Production of Documents.--
``(1) Production by foreign firms.--If a foreign public
accounting firm performs material services upon which a
registered public accounting firm relies in the conduct of an
audit or interim review, or issues an audit report, performs
audit work, or conducts interim reviews, the foreign public
accounting firm shall--
``(A) produce the audit work papers of the foreign public
accounting firm and all other documents of the firm related
to any such audit work or interim review to the Commission or
the Board, upon the request of the Commission or the Board;
and
``(B) be subject to the jurisdiction of the courts of the
United States for purposes of enforcement of any request for
such documents.
``(2) Other production.--Any registered public accounting
firm that relies, in whole or in part, on the work of a
foreign public accounting firm in issuing an audit report,
performing audit work, or conducting an interim review,
shall--
``(A) produce the audit work papers of the foreign public
accounting firm and all other documents related to any such
work in response to a request for production by the
Commission or the Board; and
``(B) secure the agreement of any foreign public accounting
firm to such production, as a condition of the reliance by
the registered public accounting firm on the work of that
foreign public accounting firm.'';
(2) by redesignating subsection (d) as subsection (g); and
(3) by inserting after subsection (c) the following:
``(d) Service of Requests or Process.--
``(1) In general.--Any foreign public accounting firm that
performs work for a domestic registered public accounting
firm shall furnish to the domestic registered public
accounting firm a written irrevocable consent and power of
attorney that designates the domestic registered public
accounting firm as an agent upon whom may be served any
request by the Commission or the Board under this section and
any process, pleadings, or other papers in any action brought
to enforce this section.
``(2) Specific audit work.--Any foreign public accounting
firm that performs material services upon which a registered
public accounting firm relies in the conduct of an audit or
interim review, or issues an audit report, performs audit
work, or performs interim reviews, shall designate to the
Commission or the Board an agent in the United States upon
whom may be served any request by the Commission or the Board
under this section and any process, pleading, or other papers
in any action brought to enforce this section.
``(e) Sanctions.--A willful refusal to comply, in whole in
or in part, with any request by the Commission or the Board
under this section, shall be deemed a violation of this Act.
``(f) Other Means of Satisfying Production Obligations.--
Notwithstanding any other provisions of this section, the
staff of the Commission or the Board may allow a foreign
public accounting firm that is subject to this section to
meet production obligations under this section through
alternate means, such as through foreign counterparts of the
Commission or the Board.''.
(f) Sharing Privileged Information With Other
Authorities.--Section 24 of the Securities Exchange Act of
1934 (15 U.S.C. 78x) is amended--
(1) in subsection (d), as amended by subsection (d)(1)(A),
by striking ``subsection (f)'' and inserting ``subsection
(g)'';
(2) in subsection (e), as added by subsection (d)(1)(C), by
striking ``subsection (f)'' and inserting ``subsection (g)'';
(3) by redesignating subsection (f) as subsection (g); and
(4) by inserting after subsection (e) the following:
``(f) Sharing Privileged Information With Other
Authorities.--
``(1) Privileged information provided by the commission.--
The Commission shall not be deemed to have waived any
privilege applicable to any information by transferring

[[Page S3277]]

that information to or permitting that information to be used
by--
``(A) any agency (as defined in section 6 of title 18,
United States Code);
``(B) the Public Company Accounting Oversight Board;
``(C) any self-regulatory organization;
``(D) any foreign securities authority;
``(E) any foreign law enforcement authority; or
``(F) any State securities or law enforcement authority.
``(2) Nondisclosure of privileged information provided to
the commission.--The Commission shall not be compelled to
disclose privileged information obtained from any foreign
securities authority, or foreign law enforcement authority,
if the authority has in good faith determined and represented
to the Commission that the information is privileged.
``(3) Nonwaiver of privileged information provided to the
commission.--
``(A) In general.--Federal agencies, State securities and
law enforcement authorities, self-regulatory organizations,
and the Public Company Accounting Oversight Board shall not
be deemed to have waived any privilege applicable to any
information by transferring that information to or permitting
that information to be used by the Commission.
``(B) Exception.--The provisions of subparagraph (A) shall
not apply to a self-regulatory organization or the Public
Company Accounting Oversight Board with respect to
information used by the Commission in an action against such
organization.
``(4) Definitions.--For purposes of this subsection--
``(A) the term `privilege' includes any work-product
privilege, attorney-client privilege, governmental privilege,
or other privilege recognized under Federal, State, or
foreign law;
``(B) the term `foreign law enforcement authority' means
any foreign authority that is empowered under foreign law to
detect, investigate or prosecute potential violations of law;
and
``(C) the term `State securities or law enforcement
authority' means the authority of any State or territory that
is empowered under State or territory law to detect,
investigate, or prosecute potential violations of law.''.
(g) Conforming Amendment With Respect to Registration.--
Section 102(b)(3)(A) of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7212(b)(3)(A)) is amended by striking ``by the Board''
and inserting ``by the Commission or the Board''.

SEC. 995. MODERNIZATION OF INVESTOR PROTECTIONS.

(a) Beneficial Ownership and Short-Swing Profit
Reporting.--
(1) Beneficial ownership reporting.--Section 13 of the
Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended--
(A) in subsection (d)--
(i) in paragraph (1)--

(I) by inserting after ``within ten days after such
acquisition,'' the following: ``or within such shorter period
as the Commission may establish, by rule,''; and
(II) by striking ``send to the issuer of the security at
its principal executive office, by registered or certified
mail, send to each exchange on which the security is traded,
and''; and

(ii) in paragraph (2)--

(I) by striking ``in the statements to the issuer and the
exchange, and''; and
(II) by striking ``shall be transmitted to the issuer and
the exchange and''; and

(B) in subsection (g)--
(i) in paragraph (1), by striking ``shall send to the
issuer of the security and''; and
(ii) in paragraph (2)--

(I) by striking ``sent to the issuer and''; and
(II) by striking ``shall be transmitted to the issuer
and''.

(2) Short-swing profit reporting.--Section 16(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78p(a)) is
amended--
(A) in paragraph (1), by striking ``(and, if such security
is registered on a national securities exchange, also with
the exchange)''; and
(B) in paragraph (2)(B), by inserting after ``officer'' the
following: ``, or within such shorter period as the
Commission may establish, by rule''.
(b) Enhanced Application of Antifraud Provisions.--The
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended--
(1) in section 9--
(A) by striking ``registered on a national securities
exchange'' each place that term appears and inserting ``other
than a government security'';
(B) in subsection (b), by striking ``by use of any facility
of a national securities exchange,''; and
(C) in subsection (c), by inserting after ``unlawful for
any'' the following: ``broker, dealer, or'';
(2) in section 10(a)(1), by striking ``registered on a
national securities exchange'' and inserting ``other than a
government security''; and
(3) in section 15(c)(1)(A), by striking ``otherwise than on
a national securities exchange of which it is a member''.
(c) Definition of ``Interested Person''.--Section
2(a)(19)(A) of the Investment Company Act of 1940 (15 U.S.C.
80a-2(a)(19)(A)) is amended--
(1) in clause (vii), by striking the colon at the end and
inserting a comma;
(2) by inserting before ``Provided,'' the following:
``(viii) any natural person who is a member of a class of
persons who the Commission, by rule or regulation, determines
are unlikely to exercise an appropriate degree of
independence as a result of--

``(I) a material business or professional relationship with
such company or any affiliated person of such company; or
``(II) a close familial relationship with any natural
person who is an affiliated person of such company:''; and

(3) in clause (vii), by striking ``two'' and inserting
``5''.
(d) Lost and Stolen Securities.--Section 17(f)(1) of the
Securities Exchange Act of 1934 (15 U.S.C. 78q(f)(1)) is
amended--
(1) in subparagraph (A), by striking ``missing, lost,
counterfeit, or stolen securities'' and inserting
``securities that are missing, lost, counterfeit, stolen,
cancelled, or any other category of securities as the
Commission, by rule, may prescribe''; and
(2) in subparagraph (B), by striking ``or stolen'' and
inserting ``stolen, cancelled, or reported in such other
manner as the Commission, by rule, may prescribe''.
(e) Fingerprinting.--Section 17(f)(2) of the Securities
Exchange Act of 1934 (15 U.S.C. 78q(f)(2)) is amended--
(1) in the first sentence, by striking ``and registered
clearing agency,'' and inserting ``registered clearing
agency, registered securities information processor, national
securities exchange, and national securities association'';
and
(2) in the second sentence, by striking ``or clearing
agency,'' and inserting ``clearing agency, securities
information processor, national securities exchange, or
national securities association,''.

SEC. 996. COMMISSION ORGANIZATIONAL STUDY AND REFORM.

(a) Study Required.--
(1) In general.--Not later than 90 days after the date of
the enactment of this Act, the Securities and Exchange
Commission (in this section referred to as the
``Commission'') shall hire an independent consultant of high
caliber who has expertise in organizational restructuring and
the operations of capital markets to examine the internal
operations, structure, funding, and the need for
comprehensive reform of the Commission, as well as the
relationship of the Commission with and the reliance by the
Commission on self-regulatory organizations and other
entities relevant to the regulation of securities and the
protection of securities investors that are under the
oversight of the Commission.
(2) Specific areas for study.--The study required under
paragraph (1) shall, at a minimum, include the study of--
(A) the possible elimination of unnecessary or redundant
units at the Commission;
(B) improving communications between offices and divisions
of the Commission;
(C) the need to put in place a clear chain-of-command
structure, particularly for enforcement examinations and
compliance inspections;
(D) the effect of high-frequency trading and other
technological advances on the market and what the Commission
requires to monitor the effect of such trading and advances
on the market;
(E) the hiring authorities, workplace policies, and
personal practices of the Commission, including--
(i) whether there is a need to further streamline hiring
authorities for those who are not lawyers, accountants,
compliance examiners, or economists;
(ii) whether there is a need for further pay reforms;
(iii) the diversity of skill sets of Commission employees
and whether the present skill set diversity efficiently and
effectively fosters the mission of the Commission of investor
protection; and
(iv) the application of civil service laws by the
Commission;
(F) whether the oversight by the Commission of, and
reliance by the Commission on, self-regulatory organizations
promotes efficient and effective governance for the
securities markets; and
(G) whether adjusting the reliance by the Commission on
self-regulatory organizations is necessary to promote more
efficient and effective governance for the securities
markets.
(b) Consultant Report.--Not later than 150 days after the
independent consultant is retained under subsection (a), the
independent consultant shall submit a report to the
Commission and to Congress containing--
(1) a detailed description of any findings and conclusions
made while carrying out the study required under subsection
(a)(1); and
(2) recommendations for legislative, regulatory, or
administrative action that the independent consultant
determines appropriate to enable the Commission and other
entities on which the independent consultant reports to
perform the missions of the Commission, whether mandated by
statute or otherwise.
(c) Commission Report.--Not later than 6 months after the
date on which the consultant submits the report under
subsection (b), and every 6 months thereafter during the 2-
year period following the date on which the consultant
submits the report under subsection (b), the Commission shall
submit a report to the Committee on Banking, Housing, and
Urban Affairs of the Senate and the Committee on Financial
Services of the

[[Page S3278]]

House of Representatives describing the implementation by the
Commission of the regulatory and administrative
recommendations contained in the report of the independent
consultant under subsection (b).

SEC. 997. MUNICIPAL SECURITIES RULEMAKING BOARD.

Section 975(b)(1) of this Act is amended by striking
subparagraph (B) and inserting the following:
``(B) by striking the second sentence and inserting the
following `The members of the Board shall serve as members
for a term of 3 years or for such other terms as specified by
rules of the Board pursuant to paragraph (2)(B), and shall
consist of (A) 8 independent individuals, at least 1 of whom
shall be representative of institutional or retail investors
in municipal securities, at least 1 of whom shall be
representative of municipal entities, and at least 1 of whom
shall be a member of the public with knowledge of or
experience in the municipal industry (which members are
hereinafter referred to as ``public representatives''); and
(B) 7 individuals who are associated with a broker, dealer,
municipal securities dealer, or municipal advisor, including
at least 1 individual who is associated with and
representative of brokers, dealers, or municipal securities
dealers that are not banks or subsidiaries or departments or
divisions of banks (which members are hereinafter referred to
as ``broker-dealer representatives''), at least 1 individual
who is associated with and representative of municipal
securities dealers which are banks or subsidiaries or
departments or divisions of banks (which members are
hereinafter referred to as ``bank representatives''), and at
least 1 individual who is associated with a municipal advisor
(which member is hereinafter referred to as the ``advisor
representative'').' ''.
______